SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended: September 30, 1996
Commission File Number: 1-12358
COLONIAL PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Alabama 59-7007599
(State of organization) (IRS Employer
Identification Number)
2101 Sixth Avenue North 35203
Suite 750 (Zip Code)
Birmingham, Alabama
(Address of principal executive offices)
(205) 250-8700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES x NO ___
As of November 11, 1996 Colonial Properties Trust had 17,656,894 Common
Shares of Beneficial Interest outstanding.
<PAGE>
COLONIAL PROPERTIES TRUST
INDEX TO FORM 10-Q
Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets as of
September 30, 1996 and December 31, 1995 .............
Consolidated Condensed Statements of Income
for the Three Months Ended September 30, 1996
and 1995 and for the Nine Months Ended
September 30, 1996 and 1995 ..........................
Consolidated Condensed Statements of Cash
Flows for the Nine Months Ended September 30,
1996 and 1995 ........................................
Notes to Consolidated Condensed Financial
Statements ...........................................
Report of Independent Accountants ....................
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .....................
SIGNATURES ..........................................................
EXHIBIT .............................................................
<PAGE>
<TABLE>
COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED BALANCE SHEETS
--------------------
<CAPTION>
September 30,
(Unaudited) Dec 31, 1995
------------- -------------
ASSETS
<S> <C> <C>
Land, buildings, & equipment, net ............. $ 740,621,964 $ 624,517,030
Undeveloped land and construction in progress . 101,320,198 32,640,381
Cash and equivalents .......................... 2,430,504 1,588,197
Restricted cash ............................... 2,474,257 2,079,796
Accounts receivable, net ...................... 2,717,311 2,282,428
Prepaid expenses .............................. 5,334,718 3,700,278
Deferred debt and lease costs, net ............ 5,365,805 3,452,044
Investment in partnerships and
partially-owned corporations ................ 5,275,726 5,890,233
Other assets .................................. 5,671,811 4,971,667
------------- -------------
$ 871,212,294 $ 681,122,054
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and mortgages payable ................... $ 431,542,723 $ 354,099,770
Accounts payable .............................. 11,742,609 11,601,811
Accrued expenses .............................. 11,068,891 2,083,032
Tenant deposits ............................... 2,776,313 2,401,604
Unearned rent ................................. 764,560 843,642
------------- -------------
Total liabilities .......................... 457,895,096 371,029,859
------------- -------------
Minority interest ............................. 133,584,118 119,199,440
------------- -------------
Common shares of beneficial interest,
$.01 par value, 50,000,000 shares
authorized; 17,656,878 and 13,044,935
shares issued and outstanding at
September 30, 1996 and December 31, 1995,
respectively .................................. 176,569 130,449
Additional paid-in capital .................... 302,850,231 205,884,198
Cumulative earnings ........................... 41,709,113 23,261,761
Cumulative distributions ...................... (64,558,291) (38,080,357)
Deferred compensation on restricted shares .... (444,542) (303,296)
------------- -------------
Total shareholders' equity ................. 279,733,080 190,892,755
------------- -------------
$ 871,212,294 $ 681,122,054
============= =============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
---------------------
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Rent ........................$33,697,454 $27,479,569 $93,090,765 $77,885,091
Other ....................... 1,133,632 946,214 3,171,780 2,830,777
----------- ----------- ----------- -----------
Total revenue ............ 34,831,086 28,425,783 96,262,545 80,715,868
----------- ----------- ----------- -----------
Property operating expenses:
General operating expenses .. 2,557,913 2,322,099 7,099,856 6,187,815
Salaries and benefits ....... 2,321,790 1,931,743 6,449,417 5,440,861
Repairs and maintenance ..... 3,629,972 3,225,600 9,777,098 8,090,656
Taxes, licenses,
and insurance ............... 2,840,136 2,530,882 8,374,087 7,103,734
General and administrative .... 1,032,899 1,179,182 2,598,282 3,744,225
Depreciation .................. 5,789,206 4,598,943 15,791,565 13,318,259
Amortization .................. 251,019 583,398 1,241,498 1,684,542
----------- ----------- ----------- -----------
Total operating expenses .. 18,422,935 16,371,847 51,331,803 45,570,092
----------- ----------- ----------- -----------
Income from operations .... 16,408,151 12,053,936 44,930,742 35,145,776
----------- ----------- ----------- -----------
Other income (expense):
Interest expense ........... (6,383,196) (5,706,186)(16,614,047) (18,093,507)
Income from investments .... 199,875 671,683 156,140 779,159
Gains (losses) from sales
of property .............. 730 (496) 15,492 174,954
----------- ----------- ----------- -----------
Total other expense ....... (6,182,591) (5,034,999)(16,442,415) (17,139,394)
----------- ----------- ----------- -----------
Income before extraordinary
item and minority interest
in CRLP ..................... 10,225,560 7,018,937 28,488,327 18,006,382
Extraordinary loss from early
extinguishment of debt ........ (9,263) 0 (487,503) 0
----------- ----------- ----------- -----------
Income before minority interest
in CRLP ..................... 10,216,297 7,018,937 28,000,824 18,006,382
Minority interest in income
of CRLP ..................... 3,301,907 2,682,638 9,553,472 7,562,500
----------- ----------- ----------- -----------
Net income ................ $ 6,914,390 $ 4,336,299 $18,447,352 $10,443,882
=========== =========== =========== ===========
Net income per share ..........$ 0.39 $ 0.33 $ 1.07 $ 0.94
=========== =========== =========== ===========
Weighted average common
shares outstanding ........... 17,656,824 13,043,263 17,283,824 11,131,062
=========== =========== =========== ===========
<FN>
The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
-------------------
<CAPTION>
Nine Months Ended
September 30,
---------------------------------
1996 1995
--------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................. $ 18,447,352 $ 10,443,882
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization ......... 17,033,063 15,002,801
Provision for doubtful accounts ....... 19,464 116,396
Gains from sales of property .......... (15,492) (174,954)
Income from investments ............... (156,140) (779,159)
Minority interest in income of CRLP ... 9,553,472 7,562,500
Decrease (increase) in:
Restricted cash ....................... (394,461) (1,019,341)
Accounts receivable ................... (403,704) 500,116
Prepaid expenses ...................... (1,454,026) (401,635)
Other assets .......................... (1,221,896) (1,677,314)
Increase (decrease) in:
Accounts payable ...................... 134,633 1,663,795
Accrued expenses ...................... 8,508,443 6,291,734
Other liabilities...................... 81,855 414,210
------------ ------------
Net Cash Provided by Operating
Activities: .............................. 50,132,563 37,943,031
------------ ------------
Cash flows from investing activities:
Property acquisition costs paid ....... (90,054,192) (50,897,503)
Development expenditures .............. (68,015,254) (14,058,919)
Tenant improvements ................... (556,569) (838,085)
Capital expenditures .................. (4,489,591) (1,564,133)
Proceeds from sales of property ....... 6,400 328,237
Distributions from investments ........ 784,441 780,874
Capital contributions to investments .. (13,794) (146,600)
------------ ------------
Net cash used in investing activities ..... (162,338,559) (66,396,129)
------------ ------------
Cash flows from financing activities:
Proceeds from stock issuance,
net of expenses paid .................. 106,859,812 73,731,007
Proceeds from dividend
reinvestment plan ..................... 101,495 -0-
Principal reductions of debt .......... (37,561,430) (36,047,194)
Proceeds from additional borrowings ... 130,040,450 61,520,000
Change in revolving credit balances ... (44,994,368) (64,468,744)
Capital distributions ................. (26,477,934) (15,307,051)
Distributions to minority partners
in CRLP ............................... (12,332,169) (9,899,811)
Payment of mortgage financing cost .... (2,587,553) (705,985)
------------ ------------
Net cash provided by financing activities . 113,048,303 8,822,222
------------ ------------
Increase (decrease) in cash and equivalents 842,307 (19,630,876)
Cash and equivalents, beginning of period . 1,588,197 20,733,110
------------ ------------
Cash and equivalents, end of period ....... $ 2,430,504 $ 1,102,234
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
COLONIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
Note 1 -- Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
have been prepared by management in accordance with generally accepted
accounting principles for interim financial reporting and in conjunction with
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included. These financial statements should be read in
conjunction with the information included in the Company's Annual Report as
filed with the Securities and Exchange Commission on Form 10-K for the year
ended December 31, 1995. The December 31, 1995 balance sheet data presented
herein was derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles.
Note 2 -- Acquisitions
On September 13, 1996, the Company acquired a multifamily community
located in Macon, Georgia at a purchase price of $9.45 million. The purchase of
this property was completed through an advance on the Company's line of credit.
On October 2, 1996, the Company acquired a 209,000 square foot shopping
center located in Orlando, Florida, for a purchase price of $18.1 million. The
purchase of the shopping center was financed through an advance on the Company's
line of credit.
On October 18, 1996, the Company acquired a 158,000 square foot shopping
center located in St. Petersburg, Florida for a purchase price of $11.8 million,
which was funded through an advance on the Company's line of credit.
On October 18, 1996, the Company acquired a 222,000 square foot shopping
center located in Orlando, Florida for a purchase price of $17.2 million. In the
acquisition of this property, the Company assumed an existing mortgage of $10.4
million that matures in October 2001 and bears an interest rate of 8.8%. The
remainder of the purchase price was financed through an advance on the Company's
line of credit.
Note 3 -- Distribution
On October 24, 1996, a cash distribution was declared to shareholders of
the Company and partners of Colonial Realty Limited Partnership (CRLP) in the
amount of $0.50 per share and per unit, totaling $ 13,020,000. The distribution
was made to shareholders and partners of record as of November 4, 1996 and was
paid on November 12, 1996.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees
Colonial Properties Trust
We have reviewed the accompanying consolidated balance sheet of Colonial
Properties Trust as of September 30, 1996, the related consolidated condensed
statements of income for the three-month and nine-month periods ended September
30, 1996 and 1995, and the consolidated condensed statements of cash flows for
the nine-month periods ended September 30, 1996 and 1995. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the year then ended (not presented herein); and in our report dated
January 25, 1996, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated condensed balance sheet as of December 31, 1995, is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
October 21, 1996
<PAGE>
COLONIAL PROPERTIES TRUST
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The following discussion should be read in conjunction with management's
discussion and analysis of financial condition and results of operations and all
of the other information appearing in the Company's 1995 Annual Report as filed
with the Securities and Exchange Commission on Form 10-K and with the financial
statements included therein and the notes thereto.
Results of Operations-- Three Months Ended September 30, 1996 and 1995 Revenue
-- Total revenue increased by $6,405,000, or 22.5%, for the third quarter
of 1996 when compared to the third quarter of 1995. Of this increase, $5,390,000
represents revenues generated by properties acquired or developed during 1995
and 1996. The $1,015,000 remainder of the increase in revenues when comparing
the third quarter of 1996 to the third quarter of 1995 represents an increase in
rents charged to tenants.
Operating Expenses --Operating expenses increased by $2,051,000, or 12.5%,
for the third quarter of 1996 when compared to the third quarter of 1995.
Expenses incurred by properties acquired during 1995 and 1996 increased
operating expenses by $2,464,000. Operating expenses also decreased by $250,000
due to the resolution of prior reserves for certain state tax contingencies.
Other Income (Expense) --Interest expense increased by $677,000, or 11.9%,
for the third quarter of 1996 when compared to the third quarter of 1995.
Interest expense increased $1,591,000 due to an increase in indebtedness which
was incurred to finance acquisition and development activity, net of
indebtedness which was repaid through a portion of the Company's equity offering
proceeds in January 1996. Interest expense also decreased by $914,000 due to the
capitalization of $1,171,000 in interest on construction expenditures during the
third quarter of 1996 compared to $257,000 capitalized during the third quarter
of 1995.
Results of Operations -- Nine Months Ended September 30, 1996 and 1995 Revenue
-- Total revenue increased by $15,547,000, or 19.3%, for the nine months
ended September 30, 1996, when compared to the nine months ended September 30,
1995. Of this increase, $13,204,000 represents revenues generated by properties
acquired or developed in 1995 and 1996. Revenues also decreased $508,000 during
the first nine months of 1996 when compared to the first nine months of 1995 due
to one-time revenues received from lease cancellations during the second quarter
of 1995. The $2,851,000 remainder of the increase in revenues when comparing the
first nine months of 1996 to the first nine months of 1995 represents an
increase in rents charged to tenants.
Operating Expenses --Operating expenses increased by $5,762,000, or 12.6%,
for the nine months ended September 30, 1996 when compared to the nine months
ended September 30, 1995. Expenses incurred by properties acquired during 1995
and 1996 increased operating expenses by $6,053,000. Operating expenses also
decreased by $1,325,000 due to the resolution of prior reserves for certain
state tax contingencies. The $1,034,000 remainder of the increase in operating
expenses when comparing the nine months of 1996 to the nine months of 1995
represents an increase in expenses incurred by existing properties.
Other Income and Expenses --Interest expense decreased $1,479,000, or
8.2%, for the nine months ended September 30, 1996, when compared to the nine
months ended September 30, 1995. Interest expense increased $639,000 due to the
increase in indebtedness which was incurred to finance acquisition and
development activity, net of indebtedness which was repaid through a portion of
the Company's equity offering proceeds in January 1996. Interest expense also
decreased by $2,118,000 due to the capitalization of $2,589,000 in interest on
construction expenditures during the nine months of 1996 compared to $471,000
capitalized during the nine months of 1995.
Liquidity and Capital Resources
As of September 30, 1996, the Company had one bank line of credit
providing for total borrowings of $110 million. The line, which is used by the
Company primarily to finance property acquisitions and development, bears
interest at a rate ranging between LIBOR plus 125 to LIBOR plus 175 basis points
and expires in December 1998. The balance outstanding on this line at September
30, 1996 was $33,888,000.
Management intends to replace significant borrowings that may accumulate
under the bank line of credit with funds generated from the sale of additional
equity securities and/or permanent financing, as market conditions permit.
Management believes that these potential sources of funds, along with the
possibility of issuing limited partnership units of Colonial Realty Limited
Partnership in exchange for properties, will provide the Company with the means
to finance additional acquisitions. Management anticipates that its net cash
provided by operations and its existing cash balances will provide the necessary
funds on a short- and long-term basis to cover its operating expenses, interest
expense on outstanding indebtedness, recurring capital expenditures, and
dividends to shareholders in accordance with Internal Revenue Code requirements
applicable to real estate investment trusts.
Funds from Operations
"Funds from Operations", as defined by the National Association of Real
Estate Investment Trusts (NAREIT) and as used herein, means net income (loss)
computed in accordance with generally accepted accounting principles, excluding
gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures are calculated to reflect funds from operations on the same
basis. Industry analysts generally consider Funds from Operations (FFO) an
appropriate measure of performance of an equity REIT, and the Company considers
funds from operations in evaluating property acquisitions and its operating
performance. Funds from Operations does not represent cash generated from
operating activities in accordance with generally accepted accounting principles
(which unlike FFO, generally reflects all cash effects of transactions and other
events that enter into the determination of net income), is not necessarily
indicative of cash flow available to fund cash needs, and should not be
considered an alternative to net income as an indication of the Company's
operating performance or to cash flow as a measure of liquidity or the ability
to make distributions.
In February 1995 NAREIT established new guidelines "clarifying" its
definition of FFO. For the Company, the primary impact of this change was a
reduction in FFO for the amortization of capitalized debt costs. Under NAREIT's
new definition, the Company's FFO for the third quarter of 1996 and 1995 and
nine months ended September 30, 1996 and 1995 was calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 6,914,000 $ 4,336,000 $18,448,000 $10,444,000
Adjustments:
Minority interest in CRLP 3,302,000 2,683,000 9,553,000 7,563,000
Depreciation 5,790,000 4,599,000 15,792,000 13,318,000
Gains from sales of property (1,000) 1,000 (16,000) (175,000)
Extraordinary loss 9,000 -0- 487,000 -0-
Adjustments (subsidiaries):
Depreciation 147,000 172,000 437,000 505,000
----------- ----------- ----------- -----------
Funds from operations $16,161,000 $11,791,000 $44,701,000 $31,655,000
=========== =========== =========== ===========
</TABLE>
<PAGE>
COLONIAL PROPERTIES TRUST
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
15. Letter re: Unaudited Interim Financial Information
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
COLONIAL PROPERTIES TRUST
Date: November 14, 1996 /s/ Douglas B. Nunnelley
---------------------------
Douglas B. Nunnelley
Senior Vice President
and Chief Financial Officer
Date: November 14, 1996 /s/ Douglas B. Nunnelley
---------------------------
Douglas B. Nunnelley
Senior Vice President
and Chief Financial Officer
(Duly Authorized Officer
and Principal Financial Officer)
Date: November 14, 1996 /s/ Kenneth E Howell
----------------------------
Kenneth E. Howell
Vice President, Controller,
and Secretary
(Principal Accounting Officer)
<PAGE>
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D. C. 20549
Re: Colonial Properties Trust
(File No. 1-12358)
Registration on Form S-8
Registrations on Form S-3
We are aware that our report dated October 21, 1996 on our review of interim
financial information of Colonial Properties Trust for the quarters ended
September 30, 1996 and 1995 and included in the Company's quarterly report on
Form 10-Q for the quarters then ended is incorporated by reference in the
registration statements on Form S-8 related to certain restricted shares and
stock options filed on September 29, 1994, Form S-3 related to the Shelf
Registration filed on February 17, 1995, and Form S-3 related to the Dividend
Reinvestment Plan filed on April 11, 1995. Pursuant to Rule 436(c) under the
Securities Act of 1933, this report should not be considered a part of the
registration statement prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
October 21, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000909111
<NAME> Colonial Properties Trust
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Sep-30-1996
<EXCHANGE-RATE> 1.000
<CASH> 2,430,504
<SECURITIES> 0
<RECEIVABLES> 2,717,311
<ALLOWANCES> 19,464
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 841,942,162
<DEPRECIATION> 95,571,721
<TOTAL-ASSETS> 871,212,294
<CURRENT-LIABILITIES> 0
<BONDS> 431,542,723
0
0
<COMMON> 176,569
<OTHER-SE> 279,733,080
<TOTAL-LIABILITY-AND-EQUITY> 871,212,294
<SALES> 0
<TOTAL-REVENUES> 96,262,545
<CGS> 0
<TOTAL-COSTS> 51,331,803
<OTHER-EXPENSES> 171,632
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,614,047
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 28,488,327
<DISCONTINUED> 0
<EXTRAORDINARY> 487,503
<CHANGES> 0
<NET-INCOME> 18,447,352
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
</TABLE>
